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European Research on Management and Business Economics 24 (2018) 137–148

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hould we make or buy? An update and review

ubén Medina Serrano, María Reyes González Ramírez ∗, José Luis Gascó Gascóepartment of Business Organization, University of Alicante, San Vicente del Raspeig, Alicante 03080, Spain

r t i c l e i n f o

rticle history:eceived 13 November 2017eceived in revised form 24 May 2018ccepted 30 May 2018vailable online 19 June 2018

EL classification:11

23

a b s t r a c t

Whether firms should perform manufacturing activities on their own or buy them from an externalprovider is a strategic question that many managers from all firm areas have historically asked them-selves. The present paper seeks to address this question by developing a theoretical framework whichcan help managers evaluate sourcing decisions. After discussing a make-or-buy literature review on 7prestigious academic journals, the most relevant determinants and theories supported from the liter-ature are identified and illustrated within this framework. The results are subsequently outlined, ourresearch work concluding with a reflection on the extent to which this paper can improve the academicunderstanding of make-or-buy approaches. Our results suggest that practitioners should combine theresource-based view, strategic management and transaction cost economics theories in order to assess

24

eywords:ake-or-buyecision-makingutsourcinglural/hybrid sourcing

manufacturing location decisions.© 2018 AEDEM. Published by Elsevier España, S.L.U. This is an open access article under the CC

BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

iterature review

. Introduction

Even though the dilemma faced by managers when it comeso choosing insourcing or outsourcing specific products or servicesas studied by many researchers in the past, they failed to considerybrid and plural sourcings. Whereas hybrid sourcing refers to therocurement of the entire volume from a single mode that exhibitsixed governance, plural sourcing results from the simultaneous

se of insourcing and outsourcing (Jacobides & Hitt, 2005; ParkRo, 2011; Parmigiani, 2007; Puranam, Gulati, & Bhattacharya,

013). Not only the historical and dichotomous make-or-buy per-pective should be taken into account by decision makers, butlso hybrid and plural sourcing views as well as the creation oftrategic alliances. Furthermore, a distinction needs to be drawnithin make-or-buy decisions manufacturing activities and those

ssociated with research and development (R&D) (Brem & Elsner,018).

According to Doz, Prahalad, and Hamel (1990), joint ventures

rovide low-cost, fast access to new markets by sharing risks andorrowing expertise from local partners. Managers and decisionakers want to know both which factors are likely to influence a

∗ Corresponding author.E-mail addresses: ruben.medina.serrano@googlemail.com (R. Medina Serrano),

r.gonzalez@ua.es (M.R. González Ramírez), jl.gasco@ua.es (J.L. Gascó Gascó).

https://doi.org/10.1016/j.iedeen.2018.05.004444-8834/© 2018 AEDEM. Published by Elsevier España, S.L.U. Thishttp://creativecommons.org/licenses/by-nc-nd/4.0/).

firm’s decision to buy a specific part or service rather than to pro-duce it internally and how the relevant factors should be evaluatedto ensure that the right decision will be made, thus avoiding futureproblems and extra costs. A number of researchers have arguedthat quite a few make-or-buy decisions have an instinctive natureor are based on an ad-hoc response – without a predetermined plan– when an obligation exists to reduce cost and/or improve the qual-ity of a product or service (Moschuris, 2007). The staff from R&D andquality departments, in addition to those working for controllingand legal departments, should play a relevant role as well (Brem,Gerhard, & Voigt, 2014). After all, the consequences of make-or-buydecisions can determine the firm’s future.

During the last few decades, academic research on make-or-buy has rapidly evolved favoring above all the outsourcing option.Indeed, the extremely fast growth experienced by the make-or-buyresearch field has hardly left any room for scholars to carry out aglobal, thorough assessment of the research activity undertaken todate. This article has as its aim not only to provide a more compre-hensive historical literature review about make-or-buy decisions,but also to analyze the determinants triggering those decisionwithin the framework of supply chain management. The goalsought with our work is threefold: examining the extant literature

available – insofar as it reveals both past and current trends – iden-tifying possible gaps; and offering potential research opportunitiesfor future researchers. The analysis of the literature will identifythe most relevant journals in this area, additionally highlighting

is an open access article under the CC BY-NC-ND license

138 R. Medina Serrano et al. / European Research on Management and Business Economics 24 (2018) 137–148

Table 1Number of papers per journal.

Journal JCR index 2016 (Q) Area No (%)

International Journal of Operations and Production Management 3.339 (Q1) Management 21 (21%)Journal of Supply Chain Management 5.789 (Q1) Management 18 (18%)Strategic Management Journal 4.461 (Q1) Business/management 18 (18%)European Journal of Operational Research 3.297 (Q1) Operations research 15 (15%)

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Journal of Operations ManagementAcademy of Management ReviewJournal of Purchasing and Supply Management

he most important determinants, as well as the most commonlyupported theories and trends in the make-or-buy literature.

. Literature review approach

Our work process began with the systematic identification ofenowned academic journals in the field of make-or-buy decisionsalso referred to as insourcing or outsourcing decisions in the lit-

rature. A search for the keywords “make-or-buy” and “insourcingr outsourcing” in academic databases was performed, following aatabase search methodology similar to the one adopted by Durstnd Edvardsson (2012); and Butkovic, Kauric, and Mikulic (2016).n particular, this review sought to screen the existing studies (pub-ished in the period comprised between 1982 and 2017) by meansf three databases – ProQuest, Scopus and Web of Science – cho-en because of their strong reputation when it comes to academicrticles.

Articles and publications dealing with make-or-buy decisionsere listed on a spreadsheet along with some basic information,amely: author; country of origin provenance; topic; and year ofublication – with the possibility of including additional comments.ur electronic search was completed with a manual one, espe-ially focused on tracing the papers cited in the bibliography ofhe previously selected articles.

The journals which serve as the basis to analyze the literatureevolving around make-or-buy decisions fulfill the requirementf appearing in the databases mentioned above and in the Jour-al Citation Report (JCR) database. The impact factor index of theeviewed journals is based on the data registered at the JCR pub-ished by Thomson Reuters in Q1-2016. The search for make-or-buyapers, which began without limiting their publication date, tooklace between January and February 2017.

The original sample of 123 articles was reduced to 99 arti-les, priority being give to articles based on empirical analysis andxaminations of the topic over theoretical ones. Only articles fromhe journals listed in Table 1 were included. The aforesaid reduc-ion meant eliminating articles which, by way of example, mightave focused on marketing or physics rather than on our researchopic. Working papers, reports and conference papers such as theutsourcing Process and Theories from the POMS 18th Annual Con-

erence held in Dallas (Perunovic & Pedersen, 2007) and books likehe Make vs. Buy revisited, reassesing your company’s manufac-uring strategy by the A.T. Kearney consulting Agency, were notonsidered (Monahan, Van den Bossche, & Tamayo, 2010). Previ-us literature review papers had also been exclusively based onhe analysis of articles, leaving aside other sources, such as books

r conferences (i.e. Gonzalez, Gasco, & Llopis, 2006). Thus, a total of9 articles – listed in the Appendix (see Supplementary Materials1)were finally analyzed.

1 The supplementary materials section contains a table with the 99 articles ana-yzed, as well as references to those articles that are in that table, but that do notppear throughout the text of the paper.

(Q1) Operations management 12 (12%)(Q1) Business/management 10 (10%)(Q1) Management 5 (5%)

3. Results

3.1. Period covered and journals analyzed

We analyzed 99 articles published during three decades, catego-rizing this period of time into three phases – shown in Fig. 1 – for thepurpose of identify research trends over time. The first stage of ouranalysis, focused on papers published before 1996, revealed thatonly 6 articles (6% of the reviewed papers) were published in thisperiod. The second stage of analysis dealt with articles publishedbetween 1996 and 2006 (29 articles, or 29% of those reviewed), andthe third stage comprises articles published after 2006 (64 articles,or 65% of the total).

One of the relevant articles, authored by McIvor (2013), high-lights the convenience of using the Transaction Cost Economicsand Resource-Based View (TCE-RBV) theories to understand themanufacturing location decision. This author illustrated comple-mentary and contradictory prescriptions of both theories, his articlebelonging to the third and most relevant stage for our researchwork (i.e. articles published after 2006). Fig. 1 illustrates a constantand steady growth in the publication of articles on make-or-buydecisions throughout the period under study. The preference foroutsourcing may have influenced the outcomes of make-or-buydecisions too, the most outstanding aspect being the rising trendin the number of papers published after 2006.

Our findings reveal a considerable number of articles publishedin journals which combine the area of production with supply chainand strategic management (57 articles in all (21 + 18 + 18)). How-ever, the relevance acquired by journals which deal not only withpurchasing but also with management review (15 articles) shouldbe taken into account as well. Table 1 lists the number of papersanalyzed per journal, the International Journal of Operations and Pro-duction Management (IJOPM) appearing as the most prolific journalin relation to the make-or-buy subject, with 21 articles published(21% of those reviewed).

IJOPM is closely followed by Strategic Management Journal andthe Journal of Supply Chain Management, both of them with 18articles published, after which can be found the European Jour-nal of Operational Research, with 15 articles published, and theJournal of Operations Management with 12 articles. Finally, theAcademy of Management Review and the Journal of Purchasing andSupply Management published 10 and 5 of the articles examined,respectively.

3.2. Research methods and relations

3.2.1. Research methodsThe papers were reviewed according to more than one dimen-

sion in this respect. After dividing them into empirical andnon-empirical based on whether they applied some type of empir-ical method or not (Alavi, Carlson, & Brooke, 1989), we adopted the

well-known empirical research categorizations (Van Horn, 1973)used in several research works with the aim to understanding themethods followed in the literature. The distinction between empir-ical strategies stems from the definition formulated by Yin (2017).

R. Medina Serrano et al. / European Research on Management and Business Economics 24 (2018) 137–148 139

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Table 2Research methodology, relationships analyzed and subject category per period.

Research methodology <1996 1996–2006 >2006 Total

Empirical 2 23 43 68Field study 2 6 23 31Multiple case study 10 12 22Field and case study 3 5 8Single case study 3 2 5Content analysis 1 1 2

Non-empirical 4 6 21 31

Relationship/level of analysis <1996 1996–2006 >2006 Total

Empirical 2 23 43 68Chain 5 15 20Firm 8 11 19Network 1 8 8 17Dyadic 1 2 9 12

Non-empirical 4 6 21 31Chain 1 11 12Firm 3 2 1 6Network 1 3 4Dyadic 1 2 6 9

Subject/topic <1996 1996–2006 >2006 Total

Outsourcing 2 13 15Risks 7 5 12Strategy 1 5 4 10Performance 2 8 10Relationships 1 1 8 10Theories 1 5 4 10Plural sourcing 1 5 6Bargaining power 1 1 4 6Make-or-Buy analysis 1 2 2 5Resources/Capabilities 1 2 2 5Supply Chain Management 5 5Others 1 4 5

Fig. 1. Number of ar

More specifically, while field studies answer such research ques-ions as ‘who,’ ‘what,’ ‘where,’ ‘how many’ and ‘how much,’ casetudies exclusively focus on ‘how’ and ‘why,’ obtaining data throughirect observation, interviews or document analysis, amongst otherrocedures. The problem with this basically qualitative data collec-ion method lies in the difficulty to generalize the results, derivedrom the limited number of organizations under study.

Instead, field studies analyze several organizations by meansf quantitative methods and collect data through surveys, theirrawback being that the information loses depth and richness inomparison with case studies (Gonzalez et al., 2006). We decidedo follow the guidelines established by Seuring and Gold (2012) todentify articles which adopt a content analysis literature strategy.his is conducted by performing a descriptive assessment of theiterature body according to specific analytical category patternserived from a typical research process.

Table 2 illustrates the frequency with which the reviewedrticles fell into empirical or non-empirical categories. 69% ofhe presented papers (or 68 articles) implemented an empiri-al research methodology, as opposed to 31% (or 31 articles)hich showed a non-empirical approach. The studies under-

aken by researchers until 1996 mostly had a non-empiricalature, the opposite trend becoming prevalent from then on.e can consequently attest that the research methodology uti-

ized by scholars changed from theoretical to empirical duringhe last decades. Scholars began to observe reality directly,nstead of trying to speculate from outside adopting a purelyheoretical perspective. This increase in the number of articlesased on empirical research methodologies probably revealed,s suggested by Brewer, Ashenbaum, and Carter (2013), anttempt to validate theories which already existed. An exam-le of this validation and extension can be found in theCE-RBV combined theoretical framework proposed by McIvor2009).

As for empirical studies, they can be classified into five groupsccording to their importance, namely: (1) field studies; (2) multi-le case studies; (3) studies with a mixed case and field methodology;4) single case studies; and (5) content analysis studies. Within theroup of field studies – the most abundant ones (31 articles, 46% ofmpirical papers) – surveys stand out as the most popular researchethod. Researchers additionally collect information from uncon-

rolled situations, without influencing the responses of their study’sbject. This method clearly seems to have prevailed over the restfter 2006. Similarly, Heide, Kumar, and Wathne (2014) designedpecific questionnaires to collect data from key informants as a

Total 6 29 64 99

way of validating their hypothesis by their concurrent sourcingresearch.

Articles based on multiple case studies (22 in all) were ournext focus of attention. After a complete absence of articlesbased on this methodology in the first period under examina-

tion – before 1996 – their relevance gradually increased duringthe following periods. Examples of such articles are provided byresearchers such as Nordigarden, Rehme, Brege, Chicksand, and

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40 R. Medina Serrano et al. / European Research on M

alker (2014) who applied a multiple case study methodologynd drew conclusions from qualitative data collected through in-epth interviews with wood manufacturing firms. Furthermore,erunovic, Christoffersen, and Mefford (2012) utilized a multiple-ase study with 3 electronic manufacturers. Unlike single casetudies, researchers are studying multiple cases to understandhe differences and similarities between cases (Baxter & Jack,008).

Thirdly, articles based on the mixed field and case studyethodology accounted for 12% (8 articles). Despite being more

ifficult to perform, such studies will enhance the overall under-tanding of make-or-buy approaches for both academics andractitioners. In this sense, Kistruck, Morris, Webb, and Stevens2015) successfully resorted to this methodology using a sam-le of 929 new foreign market initiatives and 60 interviewsith initiative leaders, senior managers and country managers

n the field, their purpose being to determine the relevance oflient heterogeneity when it comes to predicting make-or-buyecisions.

The fourth group comprised 5 articles (5% of all those analyzed)haracterized by the use of a single case study as their informationollection method. It becomes evident that, although no articlesollowed this methodology during the first period, its use has beenteadily increasing over time. A single case study appears as the besthoice when researchers want to study only one phenomenon (Yin,017). Similarly, Becker and Zirpoli (2003) adopted a case studyethodology with the aim of integrating and coordinating special-

st knowledge in the case of FIAT. Data sources such as interviews,ocumentation and observations are thus commonly used (MosesAhlström, 2009).Finally, there were 2 articles based on a content analysis

ethodology (3% of all empirical articles). Priem and Butler (2001)ried to find out the extent to which the RBV can prove to beuseful perspective for strategic management research, whereasunasekaran and Ngai (2009) conducted a content analysis devoted

o the supply chain literature. Table I in the Appendix (see Supple-entary Materials) specifies the method used in each one of the

rticles analyzed.

.2.2. RelationsA subsequent categorization of research methods such as chain,

rm, network or dyadic based on the research undertaken byooker, Giunipero, Joseph-Matthews, Yoon, and Brudvig (2008)’s

esearch – and developed from verifiable and tested evidenceBacharach, 1989) – was employed. Table 2 shows the frequencyhe examined articles focus on (1) Chain; (2) Firm; (3) Network; or4) Dyadic relations.

Articles about the supply chain as such formed the Chain cat-gory, while those written from a purchaser’s viewpoint fell intohe Firm category. In turn, all the articles focused on factors associ-ted with the make-or-buy network were labeled as belonging tohe Network category. Finally, the Dyadic category comprises all therticles centered on relationships between 2 parties.

An examination of the data reveals that chain analysis stands outs the predominant category of analysis with a total of 32 empiri-al and non-empirical articles. The firm and the network categoryf analysis respectively accounted for 25% and 21% of all studiesnalyzed. As for the number of published articles situated at theyadic level of analysis, it grew significantly after 2006 (until reach-

ng 21% of the total), the reason for this lying in the number ofrticles which examine the relationship between the buyer and its

rincipal provider. An example can be found in the paper authoredy Azadegan, Dooley, Carter, and Carter (2008) who analyzed thextent to which principal provider performance impacts on buyererformance.

ment and Business Economics 24 (2018) 137–148

3.3. Subjects/topics

This section has as its aim to briefly highlight the most relevantsubjects linked to the make-or-buy decision dealt with in the pub-lications reviewed. A list of these topics appears in Table 2, whichshows their presence by time periods together with the number oftopics addressed by each article. Our categorization of the reviewedarticles-based on the main topic examined in each article (relegat-ing secondary topics outside the statistic) and adapted from Hookeret al. (2008) – resulted in 12 categories which are displayed inTable 2.

These are the 12 categories used in this study; (1) Outsourc-ing; (2) Risks; (3) Strategy; (4) Performance; (5) Relationships;(6) Theories/Concepts; (7) Plural sourcing; (8) Bargaining power;(9) Make-or-Buy analysis; (10) Resources/Capabilities; (11) SupplyChain Management; and (12) Other unclassifiable topics of minorrelevance. The categories analyzed may fall upon several thematicareas and be combined with others in different papers. The topicdealt with in all the articles examined can be found in the Appendix(see Supplementary Materials).

The most commonly discussed topic is Outsourcing (15 papers),as can be seen in the paper authored by Laios and Moschuris (1999)which focuses on outsourcing decisions from an empirical pointof view. Another approach to outsourcing comes from Marshall,Ambrose, McIvor, and Lamming (2015), who studied the influenceof political and rational dynamics on this phenomenon. The secondmost important topic is Risks – represented with 12 articles. Out-standingly, Zsidisin (2003) analyzed managerial perceptions aboutsupply risk, Handley and Benton (2012) investigating the influenceof exchange hazards and power on opportunism in the context ofoutsourcing relationships. Based on a strategic outsourcing model(Holcomb & Hitt, 2007), managers can more accurately assess theimpact of outsourcing on supply chain and firm performance (Park& Ro, 2011), considering possible hazards by means of a suitable,ad hoc risk assessment tool.

The topics ranking third, fourth, fifth and sixth in order of impor-tance are Strategy, Performance, Relationships, and Theories – all fourof them treated by 10 articles (9%) and connected with one another.Decision makers are faced with the challenge of finding the strat-egy best suited not only to achieving their organization’s goal withthe least possible risk but also to ensuring its best and most prof-itable performance. Strategy arises as the key factor determining afirm’s vision and mission. By way of example, Boulaksil and Fransoo(2010) investigated the strategic implications of outsourcing onoperations planning through a case study about the pharmaceuticalindustry.

The topic Performance has strategic relevance for researchers,insofar as firms require a mechanism to measure the profitabilityderived from their make-or-buy decisions. In particular, Park andRo (2011) studied the impact of a firm’s ‘make,’ ‘pseudo-make,’ or‘buy’ strategy on product performance. Key performance indicatorsshould be defined and used by practitioners for them to continu-ously measure ‘make-and-buy’ performance on a permanent basis.

The topic Relationships specifically focuses on outsourcing rela-tionships between principals and external providers. Many of thesearticles support the relationship theories formulated by Klepper(1995) and Kern (1997). Whereas Mohr and Spekman (1994)explored the topic of relationships based on a field study, Boulaksiland Fransoo (2010) selected a multiple case study strategy.

Managers should become aware of intercultural differencesprior to choosing their make-or-buy approaches (Handley & Angst,2015). A better identification of the main attributes determin-

ing partnership success would enhance the position of managerswhen it comes to selecting, managing and developing an externalprovider (Mohr & Spekman, 1994). ‘Characteristics of partnershipsuccess’ stands out as one of the relevant categories mentioned by

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R. Medina Serrano et al. / European Research on M

cholars supporting mainly social exchange theories, agency theo-ies and cooperation strategies. Both lack of trust and lack of regularommunication between both parties can negatively influence out-ourcing relationships.

The category Theories/Concepts allowed us to bring togetherhose articles which deal with conceptual papers. Categorizednder this topic are the papers by Eisenhardt (1989), who soughto assess and review the agency theory, and the one written byalakrishnan and Cheng (2005) which served to analyze and updatehe theory of constraints employed at the make-or-buy process.n addition to this, Eisenhardt (1989) highlighted the firm’s con-ept as a nexus of contracts between principals and agents whichan afford protection against opportunist threats. A prior evalua-ion of chances and risks should help decision makers avoid wrongpproaches. Potential risks, outcome uncertainties and possiblencentive-mechanisms should be considered and assessed too.

Once the evaluation has been conducted, firms will be ableo identify the most optimal contract for a particular case:utcome-based or behavior-based. Contracts should be designeds a monitoring instrument and an incentive-creating mechanismEisenhardt, 1989; Jensen & Meckling, 1976). For instance, firmshoose and adopt both (1) incentives and (2) penalty plans, such as1) 5% of purchased quantity as a bonus to principals for reachingn agreed sales target or (2) reducing the purchasing volume andharging extra costs to agents following a poor delivery or an inad-quate quality performance. Such incentives and penalty methodshould also form an integral part of the internal procedures appliedithin a firm or a firm group (vertical integration).

The seventh position in this ranking corresponds to 6 articlesevolving around the topic of Plural sourcing which study howrms can make and buy at the same time. Traditionally, schol-rs investigated the make-or-buy decision on a dichotomous basisompletely ignoring the concurrent sourcing approach (Parmigiani,007). A proper balance between vertical integration and strate-ic outsourcing will most probably have an influence on productortfolio, product success, and firm performance (Rothaermel, Hitt,Jobe, 2006); hence why performance outcomes associated with

he choice of governance mechanisms should be assessed as wellHeide et al., 2014).

Despite the high number of articles which refer to outsourc-ng in general, a total of 6 articles focus on Bargaining power inhe relations between principals and external providers – sin-le source or multiple source strategy? Obviously, a single sourcetrategy increases the firm’s dependence on its external providernd reduces its negotiation capacity. Being really able to maintaincredible threat to change external providers will endow firmsith more bargaining power when it comes to negotiating bet-

er conditions and obtaining cost reductions from their providersAláez-Aller & Longás-García, 2009).

This privileged position may be restricted by previous con-ractual commitments, as a result of which changes in bargainingower can lead to governance inseparability (Argyres & Liebeskind,999). Furthermore, shifts in bargaining power are associated withhe acquisition of sufficient knowledge and skills to eliminateependence on one partner, especially in joint ventures (InkpenBeamish, 2007).Five articles directly address the Make-or-Buy analysis as the

ain topic. Having to choose between manufacturing a productn-house or purchasing it from an external provider represents aentral dilemma faced by many managers. It becomes crucial toesolve this dilemma in a structured manner and using the mostppropriate tools (Cánez, Platts, & Probert, 2000). Setting in motion

he right mechanisms (Moschuris, 2007) and taking advantage ofhe most relevant drivers will give decision-makers better insightso successfully address that make-or-buy dilemma (McNally &riffin, 2004).

ment and Business Economics 24 (2018) 137–148 141

Resources/Capabilities stands out for being another popular topic,as shown by the five published articles belonging to this cate-gory. Resources are assets owned by an organization which canbe physical, tangible, and human. In turn, capabilities are com-plex patterns related to skills when utilizing resources to achieve adesired product or service. Resources and capabilities are essen-tial for an organization’s competitive advantage. Articles withinthis domain have focused on arguing that capabilities serve as shiftparameters from insourcing to outsourcing (Jain & Thietart, 2013)– and vice versa – when firms own better capabilities than theirpotential external providers (Argyres, 1996). Added to this, Peetersand Martin (2015) drew a distinction between the use of exter-nal knowledge for replication purposes (using knowledge itself)and the one which focuses on compounding (building on acquiredknowledge by combining it with internally developed knowledge).

The articles based on Supply Chain Management accounted for5% of the total (5 articles). The problem faced by managers con-sists in identifying which supply chain strategy best adapts to theirfirms’ goals. According to some researchers, the need for flexi-bility constitutes a key criterion for firms to rapidly meet theircustomers’ demands. Firms may improve flexibility throughoutthe chain by engaging in committed relationships with externalproviders (Stevenson & Spring, 2009). On the other hand, Atkinsand Liang (2010) suggested that decentralization can be preferablefor competitive supply chains because it increases the unit supplycost of direct competitors.

Finally, five articles dealt with Other issues, amongst themthe one written by Leiblein and Miller (2003) which examinestransaction-and firm-level influences along the vertical boundariesof the firm.

3.4. Theoretical framework

Input from Sections 3.4.1 and 3.4.2 was collected below seekingto build a comprehensive conceptual make-or-buy framework ableto capture relevant determinants and theories which need to betaken into account in such decisions. Such a framework developedin accordance with the guidelines proposed by Miles and Huberman(1984) and its subsequent implementation by Cánez et al. (2000).The conceptual framework illustrates the importance and results ofthe theories and determinants identified on the examined articles.Furthermore, possible outcomes identified from the literature arelisted in Fig. 2.

3.4.1. Theories utilized in the articles examinedThe articles under review were classified following the cat-

egorization in the Theoretical Foundations theory proposed byDibbern, Goles, Hirschheim, and Jayatilaka (2004), who definedthe Theoretical Foundations for outsourcing research in nine theo-ries which are listed with our own analytical results in Fig. 2. Theanalysis determines whether the research supports (1) Resourcetheories; (2) Transaction Cost Economics (TCE); (3) Strategic Man-agement theories; (4) Relationship theories; (5) Agency theory;(6) Social Exchange theory; (7) Game theory; (8) Innovation the-ories; (9) Power and Politics theories; or a combination of severalof those theories. Each paper’s categorization takes into accountwhich theories are most relevant for it. Additionally, we have iden-tified researchers supporting several theories in the same article.

(1) Resource Theories search for a competitive advantage; accord-ing to the RBV, the option ‘make’ prevails whenever the firm’s

resource position is high, the option ‘buy predominating in theopposite case.

(2) TCE, which plays a fundamental role in the make-or-buy deci-sion, claims that the option ‘make’ should be taken if the

142 R. Medina Serrano et al. / European Research on Management and Business Economics 24 (2018) 137–148

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potential for opportunism is high – the option ‘buy’ beingpreferable with a low potential for opportunism.

3) From a Strategic Management Theories point of view, theadopted make-or-buy choice consists in the initiatives and theallocation of the resources needed to achieve the firm’s long-term goals. A trend observed in the articles examined is thecombination of several theories to resolve the make-or-buydilemma. This option mainly received support from McIvor(2009), according to whom neither TCE nor RBV alone canexplain and address the make-or-buy decision. Nearly half ofthe papers analyzed are structured around RBV, TCE and Strate-gic management theories to some extent, and partially supporta combination of these three theories (54% (19% + 18% + 17%)).

Whereas RBV theory sees the relative capability of focal firmsnd exchange partners as an important factor for ‘make’ decisions,ransaction-based perspectives explain different governance formsArgyres, 1996; Holcomb & Hitt, 2007). In turn, strategic theo-ies focus on firms’ strategic advantages and long-term plans tomprove their operational performance. The integration of TCE, RBVnd relevant concepts such as performance management or oper-tions strategy have been highlighted by renowned researchers –ost importantly, McIvor (2009) – and not only validated but also

nlarged with performance attributes by Brewer et al. (2013). Evenhough the framework proposed by McIvor (2009) contains contra-ictory prescriptions stemming from RBV and TCE when it comeso outsourcing decisions, the integration of TCE and RBV theories isupported by a broad representation of the research community.

4) The second most strongly supported – and recently favored –theory within the make-or-buy field after the combination of

the aforementioned theories is the ‘relationship theory,’ whichaccounted for 13% of the reviewed papers. Relationship theoriesfocus on the interactions between parties such as principals andagents which are adapted so that those parties can accomplish

framework.

their individual objectives and reach successful partnerships.Relationship theories work between firms and exchange part-ners, as well as within the firm itself. While being compensatedfor choosing external providers based on price only leads to adecreasing joint action, McNally and Griffin (2004) suggest thatbeing compensated for implementing close relationships leadsto an increasing joint action.

Several notable trends were identified concerning the impor-tance of using appropriate communication – particularly in termsof frequency, quality and mode – between firms. Parker andRussell (2004) suggested that a decrease in cooperation, trust,approachability, communication, fairness, helpfulness and poorcommunication between firms causes confusion, frustration, andannoyance, which is likely to result in a low performance of externalproviders. Collaboration and interdependence appear as essentialingredients in the management of supply chain performance thatrequire establishing long-term cooperative relationships (Howard& Squire, 2007) with preferred external providers.

(5) The next most relevant topic – present in 9% of the papers –is the agency theory, which helps expose problems of diver-gent interests in outsourcing and suggests the convenience ofensuring an optimal contractual relationship between princi-pals and agents to reduce the degree of uncertainty usuallyinherent to agents’ behavior. The agency theory reminds usthat much of organizational life is based on incentives and self-interest (Eisenhardt, 1989), and outsourcing does not seem tobe the most advisable choice when the output cannot be mea-sured, an insufficient quality level exists, cost uncertainty ishigh, and agents show a hostile attitude (Balakrishnan, Mohan,

& Seshadri, 2008).

(6) As for Social exchange theories, they support the reciprocity ofbenefits and costs through an exchange of activities betweenboth parties (Emerson, 1972). This theory holds true for internal

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as well as for external exchanges. The principle underpinningthe social exchange theory is the assumption of exchange reci-procity in terms of benefits and costs; 9% of the papers partiallysupport this approach. It additionally deserves to be highlightedthat this theory has proved to combine with the game theoryin some research works.

7) The game theory starts from the premise that every playerunder the same conditions makes rational and intelligent deci-sions seeking to maximize their respective profit (Dibbern et al.,2004; Fudenberg & Tirole, 1990). Thus, firms facing the fear ofimitation could and should reduce the use of external sources(Giarratana & Mariani, 2014). As said above, the option of usingthe game theory in combination with the agency theory isbacked by a number of researchers, support for the game theoryaccounting for 6% of all the articles under review. Proper rela-tional contracts become of paramount importance to improvesupply chain collaboration, ultimately seeking to safeguardfirms’ interests and to prevent opportunistic behaviors on thepart of future external providers. Informally promising futureinteractions to sustain collaboration sounds more feasible toexternal providers than to internal units, insofar as the providercan use its assets elsewhere (Brahm & Tarziján, 2016).

8) Finally, innovation theories, together with power and politicstheories respectively accounted for 6% and 2% of all the articlesexamined. Innovation theories see the make-or-buy decision asa way to adopt innovations and new technologies, spreadingthem throughout firms (Rogers, 1983). For instance, firms mightbe choosing to source out the development of a product due tothe lack of in-house skills.

The previous question about the extent to which firms’ decisionso outsource or internalize R&D, production or specific processesr services affect their technological performance is one that man-gers often ask themselves.

Interestingly, Leiblein, Reuer, and Dalsace (2002) posed thatfirm’s technological performance is contingent upon the align-ent between firms’ governance decisions and the significance of

ontractual hazards. Outsourcing has been aligned to reduce costsnd improve flexibility. Firms can enhance their innovation perfor-ance in the near future by gaining access to external providers’

nowledge. However, a combination of knowledge with externalroviders might spill over the firm’s own internal knowledge, espe-ially in regions populated by organizations with a high absorptiveapacity (Giarratana & Mariani, 2014). A ‘make’ decision will bereferred in such cases.

9) A Power and Politics theories claim that government regulationsand political instability are likely to determine the viability of afirm’s strategy, accordingly having an impact on make-or-buydecisions too. Indeed, power and politics can play an impor-tant role when it comes to make-or-buy decisions (Lacity &Hirschheim, 1993), as shown by the fact that some very power-ful firms and individuals even find themselves in a position tostrongly influence regulations, politics and markets (Harland,Brenchley, & Walker, 2003). Firms may not have the capabil-ity to eliminate or mitigate many of the external political andregulatory risks, though.

.4.2. Determinants for make-or-buy decisionsOur classification of the articles under review was based on the

efinition of determinants for outsourcing proposed by Dibbern

t al. (2004), the most representative determinants identifiedhrough the articles examined in the present paper being: (1)osts; (2) Strategy; (3) Capabilities; (4) Uncertainty; (5) Moni-oring; (6) External forces; (7) Information; and the combination

ment and Business Economics 24 (2018) 137–148 143

of several of those determinants. The categorization of eachpaper takes into account which determinants are more rele-vant for it, which is why we have observed/paid attention toresearchers proposing several determinants for the make-or-buy decision in the same article. Fig. 2 provides a summary ofresults.

(1) Costs include both the organization’s relative performanceefficiency and its transaction, agency and hidden costs. Costreduction arises as the main driver for outsourcing – it accountsfor 64 articles (22% of all the articles analyzed). This resultmatches those obtained by researchers such as Moschuris(2007), who suggested that cost saving constitutes the mostimportant criterion when exploring make-or-buy decisions.

(2) Strategy comprises strategic significance analysis, strategicimportance and fuzzy focus. The second most important factorfor make-or-buy decisions is the strategy adopted by the firmitself (it is present in 21% of the papers). Firms may outsourcenon-core activities with the aim of focusing on core activities in-house, if the latter are defined as strategic and non-transferablefor the firm (Miles & Snow, 1978).

(3) 19% of the articles examined present capabilities as an impor-tant factor to address the make-or-buy dilemma. Capabilitiesembrace gaps in manufacturing capabilities, leverage internaltechnical capabilities, along with internal and vendor capabil-ities. The resource position of a firm can determine whether aproduct or service should be sourced in or out. Moreover, Quinnand Hilmer (1994) stated that the loss of critical internal skillscan be avoided through a structured insourcing or outsourcingmanagement.

(4) Uncertainty, with a proportion of 15% of the total includes a vari-ety of root sources, amongst which stand out sales, market orproduct uncertainty. Uncertainty involves endemic uncertainty,unexpected and undesirable outcomes too.

(5) Monitoring contains both the inability to control externalproviders and the loss of control over external providers (Mon-itoring and external forces accounted for 8% of the papers underanalysis. Albeit possibly having little relevance for domesticoutsourcing, Monitoring, auditing, surveillance and supportingcosts can become much higher for offshore outsourcing. Mon-itoring costs should be taken into account prior to addressingthe make-or-buy decision.

(6) As for External forces, they refer to those factors likely to affectthe make-or-buy process which have to do with market pricesfor raw material supplies. These forces are additionally relatedto consumer demand for firms’ finished products, govern-ment regulations, and the strength of effective competition.External forces such as political instability, national or interna-tional regulations, or even natural catastrophes influence themanufacturing location decision. Firms can pursue a verticalintegration strategy, incorporating additional plants into theirbusiness group or seeking partnerships and alliances with thirdparties that will allow them to enter new markets.

(7) Finally, information – the relevance of which amounts to 7%– plays a significant role in firms’ relationships. Informationcovers the dependence on information and the importance ofhaving sustained innovative information available. Sustainedinnovation comes from sharing information with externalproviders on a regular basis. Bidirectional communication andmutual information sharing help avoid the emergence of asym-metric information between firms and their external providers.Asymmetric information, sometimes referred to as information

failure, arises whenever one party possesses greater prod-uct or service knowledge than the other during an exchangeprocess.

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. Discussion

.1. Theoretical and managerial implications of our findings

What should a small and medium-sized enterprise (SME) orlarge enterprise know when they face make-or-buy decisions?fter performing an in-depth analysis of the articles under exami-ation, the following trends stood out:

1) Combination of multiple theories: the make-or-buy decision canneither be explained nor resolved by one theory alone; a com-bination of multiple theories is needed which can complementeach individual theory, contradicting deficits of addressingmake-or-buy decisions based on only one theory. More thanhalf of the papers analyzed support the combination of severaltheories to address the make-or-buy approach in some way oranother. Whereas the RBV theory assigns importance to the rel-ative capabilities of focal firms and exchange partners in ‘make’decisions, the TCE theory explains different governance forms,and strategic theories focus on firms’ strategic advantages andlong-term plans to improve their operational performance. Thecombination of those theories should be taken with caution inthe light of some contradictions. The challenge for researcherslies in finding a correct balance between such theories inorder to adapt them to address certain make-or-buy decisions.A conceptual framework was developed to help managersevaluate sourcing decisions. Unlike the results obtained byMcIvor (2009), ours suggest not only considering the TCE andRBV theories to evaluate manufacturing location decisions butalso take account of additional theories such as strategic andrelationship theories.

2) Risk mindset: the relevance according to the number of articleswhich discuss the possible hazards and threats of outsourcingmakes it advisable to prioritize this topic and taking it intoaccount. Practitioners and managers can more accuratelyassess the impact of outsourcing on supply chain and firmperformance through a suitable risk assessment tool. The pos-sible risks and chances involved in dealing with make-or-buyissues should be evaluated during the make-or-buy process,

as required by the ISO 9001:2015 revision. Our results arein keeping with the evaluation of the potential for oppor-tunism risks, implemented within the framework developedby McIvor (2009). We essentially suggest that firms should

Fig. 3. Characteristics of p

ource: Adapted from Lehtonen (2004).

ment and Business Economics 24 (2018) 137–148

evaluate emergency plans, analyzing second source options inorder to minimize risks.

(3) Relationship success factors: the importance of relationships andthe characteristics of partnership success have been widely dis-cussed by researchers who mainly support social exchange the-ories, agency theories and cooperation relationships. Our cate-gorization of the articles under review was structured aroundthe factors described by Lehtonen (2004), listing the supportedsuccess factors on a spreadsheet so that the factors most com-monly supported in the literature examined could be validated.

Our spreadsheet contained the attributes and success factorsidentified in the articles under review. Those attributes and suc-cess factors are summarized in Fig. 3. An identification of themost important partnership success characteristics would placepractitioners in a better position to select, manage and developexternal providers. Decision makers should be aware of intercul-tural communication techniques prior to addressing a make-or-buyapproach. Which factors make a partnership successful?

Out of 99 papers analyzed, 36 partly mentioned one or severalsuccess factors or attributes, which were clustered following thefactors proposed by Lehtonen (2004). It follows from the identifiedarticles that the most frequent success factors of partnership are therelationships based on collaboration and the willingness to adopta joint problem-solving strategy (97%), headed by the next signif-icant ones being bidirectional clear and open information sharingwith 58%. This result follows along the lines of collaboration withsupplier factor implemented at the framework developed by Cánezet al. (2000). Clearly defined and mutually agreed goals, incentivesand penalties accounted for 42% (or 15 papers). Regularly updatingcosts and information, and mutual involvement in the developmentof the partnership accounted for 31% and 25% respectively.

Finally, a mutually agreed long-term perspective and the abilityto meet agreements in time and properly respectively represent11% and 8% of the total (36). What are the attributes of partner-ship relationships? The attributes of partnership relations mostcommonly supported in the examined articles mainly revolvedaround such aspects as: communication quality and participation(78%), mutual trust (67%), commitment (39%), sharing chancesand risks (17%), homogeneity (17%), intercultural understanding

(14%), continuous improvement (8%), fairness (6%), honesty (6%)and involvement and support on all firm levels (3%). Looking forpartners and external providers with such attributes can positivelyinfluence future outsourcing relations.

artnership success.

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Determinants for outsourcing such as costs or capabilities –included within the criteria defined by Baines et al. (2005) – canbe taken into account as a reference for attribute generation. Dur-ing the performance evaluation, we estimate the results of possible

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Firms’ achievements in the area of sustainable developmentre currently evaluated using the data provided by their Companyocial Responsibility (CSR) report. Firms showing the best CSR rep-tation are the ones which ensure their active compliance with thepirit of the law, ethical standards and national and internationalorms. Managers and practitioners should evaluate which type ofelationship best suits each external provider selected.

4) Plural sourcing and Hybrid sourcing: in addition to the dichoto-mous make-or-buy approach, we observed an increase in thenumber of papers supporting the plural sourcing option litera-ture after 2007. Hence, our decision to categorize the articlesanalyzed on a spreadsheet concerning the articles address-ing Plural and Hybrid sourcing. Our analysis showed thatresearchers use a wide range of terms when referring to thistopic. Examples are (1a) concurrent sourcing; (1b) plural sourc-ing; or (1c) parallel production; (2a) mixed sourcing; (2b);pseudo-make; or (2c) hybrid sourcing.

Unlike Heide et al. (2014), who argued that concurrent sourcingn itself suppresses external provider opportunism, Nordigardent al. (2014) presented a variety of scenarios to solve productionlanning needs through the assessment of the ‘make,’ the ‘buy’ orcombination of both. In turn, Puranam et al. (2013) proposed

n integrated framework to explain how complementarities andonstraints encourage plural sourcing and identify the optimal mixf internal and external sourcing. Cassiman and Veugelers (1997)ikewise confirmed the complementary nature of make and buyecisions as an evidence from Belgian manufacturing firms.

Internal and external sourcing can prove synergistic when usedoncurrently. Plural sourcing refers to the splitting up of the totalolume procured by means of multiple modes, each of which maye a pure governance mode. Plural sourcing uses two mechanismsimultaneously. Instead, hybrid sourcing refers to the procurementf the entire volume from a single mode that exhibits mixed gov-rnance characteristics. Hybrid sourcing represents a procurementode characterized by a degree of cooperation and coordinationhich is unusual in market relationships. As opposed to the Make-

r-Buy controlling matrix proposed by Brem and Elsner (2018), ouresults suggest that not only the pure make or buy strategy shoulde assessed, plural and hybrid sourcings need to be considered asell.

5) Structured, documented process and skilled personnel: we fol-lowed the same procedure as in Section 3. The articles analyzedwere categorized with regard to the ones that resolved themake-or-buy process in a systematic and structured way andsubsequently listed on a spreadsheet. By way of example, Mosesand Ahlström (2009) as well as Baines, Kay, Adesola, and Higson(2005) were in favor of addressing the make-or-buy decisionin a structured manner, and Cánez et al. (2000) proposeda framework to fill this gap in the literature. Another man-agerial implication is the consideration of product/subsystemaggregation schemes and make-or-buy controlling matricesto operationalize the make-or-buy framework, as pointed byBrem and Elsner (2018). They posited that complexity costscan be reduced by simplifying the decision-making level. Thisis in keeping with our preference for addressing the make-or-buy in a structured manner after the results obtained. It can beinferred from the articles under analysis that, if the approachduring the make-or-buy decision process is neither structurednor standardized, manufacturing organizations are likely to

lose competitiveness.

A wrong decision can influence the organization’s future. Theake-or-buy decision process should be structured, documented

ment and Business Economics 24 (2018) 137–148 145

and conducted by a multi-disciplinary team. The staff involved inthis process should be qualified and receive training periodically.Firms will require outsourcing managers and skilled personnel withexperience in outsourcing relationships; which is why they shouldput in place processes to ensure the transfer of this know-how tonew employees.

(6) Stages in the make-or-buy decision process: the literature reviewmade it possible for us to categorize the stages in the make-or-buy processes mostly following the models proposed by Baineset al. (2005), Cánez et al. (2000) and the process methodologystandardized by the ISO 9001-2015 PDCA-Cycle (ISO, 2015). Incontrast to their results, our suggestion is that practitionersshould take the improvement stage into consideration for pos-sible reevaluations. The information obtained from the articlesexamined with regard to addressed make-or-buy stages waslisted on a spreadsheet. We additionally checked/realized thatthe terminology used by researchers varies to a large extent,which stresses the need to standardize all these terms in accor-dance with the ISO 9001 norm.

The complete decision process is described as having 4 stages:(1) planning; (2) data collection and analysis; (3) performance eval-uation; and (4) improvement. The project leader assigned for themake-or-buy decision, plans, coordinates and leads activities mak-ing sure that tasks are accomplished according to the milestonesplan. Achieving the key milestone dates on time turns out to beessential for the multidisciplinary team involved in the process.

The overview is drawn/graphically represented in Fig. 4. Anyorganization making a make-or-buy decision should criticallyexamine and carefully explain what they want to achieve throughinsourcing or outsourcing. The planning phase establishes the objec-tives sought with the make-or-buy process and the resourcesrequired (including the selection of a multi-disciplinary team) inaccordance with the firm’s strategy, additionally identifying andaddressing both risks and opportunities. The data collection andanalysis can be divided into three subcategories: (a) attribute gener-ation; (b) attribute weighting; and (c) attribute rating. The highestscore of the decision matrix indicates the best option in the analysis.

Fig. 4. Stages in the make-or-buy process.

Source: Adapted from the PDCA-Cycle of ISO 9001:2015 norm.

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ctions resulting from the previous stage, performing a SWOTnalysis and preparing a proposed action plan ranked in orderf potential effectiveness. The improvement stage has as its aimo undertake proposed actions by allocating both a timescale andesponsibilities, and to verify the firm’s strategic position and, ifecessary, improving it from the lessons learned.

7) Automation as a complementary or substitute for offshoreoutsourcing: a number of certain risks linked with off-shore outsourcing, amongst which stand out product recalls,long delivery times and complex relationships with externalproviders, make it advisable to consider the automation option.Managers deciding to outsource in offshore locations shouldbe particularly aware of the fact that such a strategy entailsrisks and therefore they should adopt the necessary preventiveactions.

Two main alternatives are available to managers: either (1) out-ourcing locally where firms can have a higher degree of controlnd a better relationship with the external provider (Steven, Dong,Corsi, 2014) or (2) insourcing the product or service through the

evelopment of an automated manufacturing process or a smartactory. The automation trend known as industry 4.0 creates whatas come to be known as ‘smart factories’ – where firms can per-

orm automated processes, reduce production costs, and improveuality failure rates. The search for automation is expected torow, which means that the threat of automation will continue toncrease. Opportunities exist for firms able to combine their ser-ices with a certain level that will give them more governancef/over the process. This ‘ownership of the process’ factor is alsoddressed in the framework designed by Cánez et al. (2000). Theyid not consider the smart factory insight, though.

8) Main determinants for the make-or-buy process: the articlesexamined tend to show a prevalence of the factor cost asthe major determinant for insourcing or outsourcing. Thistrend was empirically confirmed in the hotel sector by Espino-Rodríguez and Rodríguez Díaz (2017). Nevertheless, firmswhich still make their sourcing decisions based only on costwill eventually die (Welch & Nayak, 1992).

Cost, strategy and capabilities appear to be the most signif-cant criteria, which suggests that firms usually resolve tactical

ake-or-buy issues seeking to achieve cost savings and strate-ic or operational advantages. Our results are in keeping with theramework of Brem and Elsner (2018), where the relevance of arm’s strategy ensure the identification of its core competencies.ncertainty, external forces and monitoring play an important role

or the outcomes of make-or-buy decisions. Finally, informationeficits together with information asymmetry add to the adminis-rative demands of organizing transactions and impact negativelyn supply chain sourcing.

.2. Limitations and further research

Notwithstanding the above findings and contributions, thistudy faced a number of limitations and so do its outcomes. Firstly,potential limitation of this study stems from the fact that our

n-depth analysis focused exclusively on articles published in 7restigious journals. Secondly, using only the ProQuest, Scopus andeb of Science databases in the present study may have prevented

s from covering all the articles in the field of ‘make-or-buy.’ Fur-

hermore, our review is limited to research published in articles,eaving aside other sources such as books or conference reports.his limitation concerning the choice/selection of sources ana-yzed can hardly be avoided in any literature review. However, our

ment and Business Economics 24 (2018) 137–148

findings seem to provide a valuable understanding of the currentsituation in this research field. The present study equally suggestsa number of future research strands which may encourage moreintensive research in this important area.

In our opinion, this article can prove useful for both researchersand decision makers, since both areas reflect new trends that willprobably lead to future research and future implementation insidefirms. Hopefully, the present paper will trigger a new approach tostudying make-or-buy decisions, to which must be added that ourresults provide practical guidelines to adopt a sourcing strategybased on the relevance that corresponds to the various determi-nants for the firm.

There is clearly still plenty of room for growth and improvementwithin the make-or-buy literature. For instance, the academic lit-erature has multiple studies focusing only on one link addressingthe make-or-buy (focal firm to principals or focal firm to agents).A chance for future researchers also stems from the empirical val-idation of the proposed theoretical framework.

Basically, does the make-or-buy process require a make-or-buy specialist within firms? Does such a position exist? Hasa training program been put in place? How is this knowledgetransferred to the next generation? Aspects such as the proxim-ity to markets, the macroeconomic and political situation, tradeimplications, profitability, technical differentiation, contract manu-facturers’ capability, along with core or non-core activities stronglyinfluence this decision.

Admittedly, the research questions listed below have alreadybeen investigated. Nevertheless, it is our conviction that a needexists to continue updating the dichotomous make-or-buy deci-sion so that the scientific community can be helped with updatedand new research insights. What considerations are borne in mindduring the make-and-buy’s decision process? To what extent doesthe make-and-buy impact on firms’ operational performance? Whyare fixed and hidden costs ignored in make-and-buy decisions? Howcan organizations implement these structured decision-makingmodels? As far as the make-and-buy is concerned, it does not sufficeto consider the aforementioned theoretical models or explanationsfor the outsourcing phenomenon, we must do things differently thenext time because we previously made quite a few mistakes thatresulted in great failures.

5. Conclusion

The research presented in this paper has important implicationsfor theory and practice both regarding the supply chain as a wholeand more precisely in terms of procurement management. Despiteundoubtedly providing valuable results, the literature review car-ried out so far were based on a random selection of articles focusedmainly on the TCE theory. This paper aims to analyze the determi-nants for the make-or-buy decision in supply chain managementthrough the analysis of 7 prestigious academic journals. The mostoutstanding aspect identified is the upward trend in the number ofpapers published from 2006 onwards.

The growing popularity of outsourcing may also have somebearing on the outcomes of make-or-buy decisions. The articlesassessed followed a variety of research methods, favoring empiri-cal techniques to a greater extent than those of a purely theoreticalnature. Within the empirical methods, the field study has been usedmore profusely for designing surveys for purchasers and decisionmakers involved in make-or-buy decisions.

A description is made about the theoretical framework for

make-or-buy evaluation, its development being structured aroundthe integration of the most widely supported theories and deter-minants in the literature under review. Our results thus seem toconfirm the link between those theories and insights: (1) TCE;

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2) resource theories; (3) strategic theories and the most relevanteterminants; (1) costs; (2) capabilities; (3) strategy to addressake-or-buy decisions. Our findings emphasize the importance

f evaluating not only traditional pure sourcing – ‘make or buy’ –ut also the combination of both ‘make and buy’ (plural sourcing),

hybrid sourcing’ and strategic alliances so that firms can design theanufacturing strategy which best fits their structure.The make-or-buy assessment framework presented intends to

eal with the trends identified in the literature by capturing rele-ant approaches considered in make-or-buy decisions. It has as itsim to provide a graphical representation of relevant dimensionshich need to be studied when examining make-or-buy decisions.ne of the main contributions made by the article consists in thereparation of a list with the trends identified in the literatureogether with the categorization of the most outstanding subjectsound in the specific articles examined. An analysis of these trendshould help clarify the topics which raise the most interest amongstesearchers.

Our findings also highlight the importance of addressing make-r-buy decisions in a structured manner. A multi-disciplinary teamhould evaluate the possible risks and chances involved in deal-ng with make-or-buy issues through a suitable and adapted riskssessment tool. A four-stage model for the decision process whichollows the trend observed in the literature reviewed has beenuggested and adapted to the PDCA-Cycle (Plan, Do, Check, Act)ccording to the requirements of the ISO 9001:2015 norm.

Therefore, in a common manufacturing situation where mul-iple principals are depending on external providers and whereazardous behavior cannot be punished, it is perhaps better toely on building up a “win-to-win” relationship regulated byexternal provider agreements” with defined contracts that cannfluence multiple sources and long-term-relationships. Moreover,t becomes clear that cost reduction alone is not the most decisiveactor for make-or-buy; aspects such as the risk of core capabilities,trategy, uncertainty, flexibility, capital requirements, financialeturns, and level of skills and expertise need to be considered asell.

ppendix A. Supplementary data

Supplementary data associated with this article can be found, inhe online version, at doi:10.1016/j.iedeen.2018.05.004.

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